Since going up to the resistance from March 2013, NZD/USD failed to put in a daily close above it for four consecutive business days. The pair has been dropping since yesterday’s last bullish push, an attempt that went as high as 0.8700. ANZ Commodity Price Index dropped 0.1% from February, down to 337, marking the first decline in four months.
Technical Analysis
Yesterday’s drop formed a bearish engulfing pattern on the daily timeframe, conveying the market’s intentions for a correction from this point onward.
The first supports have already been broken, with price already closing below the trendline that defined this bullish rally since early February. Next in line is the 0.8565-0.8570 area, where the 100 Simple Moving Average on 4H timeframe, 61.8% Fibonacci retracement from 0.8500 to 0.8700 and a small pivot point from late February might provide temporary support.
A close below 0.8565 will extend the correction towards 0.8500 price pivot zone. Later it can drop to 0.8466, where the 200 Simple Moving Average on 4H and 38.2% Fibonacci retracement between 0.8050-0.8700 should provide sellers with a more meaningful challenge.
Until the bullish trend configuration of higher swing highs and higher swing lows isn’t completely invalidated, all rejections starting from the afore mentioned levels should be treated with caution, since they can mark the end of the correction and continuation of the main trend.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets